Your credit report is the lifeblood of the credit card points and miles hobby. A great score means that you’ll almost never have to worry about being denied a card when the time comes to apply. A poor score on the other hand, often means that you’ll have to sweat out each application, and you might miss out on some good offers. We’ve gone in depth in the past about how your credit score is calculated, we’ve debunked credit score myths, and talked about how to improve your credit score. I’d encourage readers to check out those articles before proceeding. Today we’re gong to focus on answering a question from Facebook about a line item that a user saw on her credit report. The specific question was:
Credit Karma just alerted me to a change in the remarks for one of my Citibank cards. The remark says “Affected by Natural Disaster”. I didn’t add this nor was I affected by a disaster. So my questions: Do I care about this remark?Should I have it corrected? How did it happen?
Affected by Natural Disaster – What does it mean?
To understand what it means, we first need to understand how credit reporting works. On the one hand you’ve got financial companies such as banks and credit unions which you have relationships with. They loan you money, extend you credit, etc. To do this they first ask credit reporting agencies for your credit report. That report, as explained by ConsumerFinance.gov is:
a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts.
The credit activity information comes from, or is furnished by, those banks and credit unions that we talked about earlier. Whenever you make payments, close/open accounts, are late with a payment, etc. they tell the reporting agencies about it. In the event that you’re living in or around an area which has been affected by a natural disaster, the banks may choose to submit the “Affected by Natural Disaster” line item to the reporting agencies.
Interestingly, banks are not required to do so, though they’re encouraged to do so as part of the industry standard. Moreover, the Metro 2 format as defined by the CDIA provides guidelines on when to add and remove the remark.
In 2018 a special report from the Bureau of Consumer Financial Protection found that after Hurricane Harvey in 2017, nearly 40% of Houston residents had the natural disaster code applied to their credit reports. To read the full report, click here.
The purpose of the special comment is to let creditors known about an extraordinary circumstance should a customer miss or be late for a payment. Banks do not use the code to approve or deny consumers for additional credit.
What to do if you are affected by a natural disaster
While sometimes the code can be added automatically, its important to be proactive if you’re affected by a natural disaster. In those cases, if you think you’re likely to miss a payment and/or pay late, or overcharge on your card, its important that you reach out to your lender. Call each one individually to explain your situation. In most cases the banks have processes in place to protect borrowers against these unforeseen circumstances. You may be able to pay less than required, they may grant you temporarily relief for paying late, etc. Moreover, they will also (in most cases) apply the remark code that we mentioned above to your credit report.
Below are links to several banks disaster help pages, they’re generally a good place to start:
Seeing the “Affected by Natural Disaster” remark code on your credit report is not a bad thing and its not going to affect your score in a negative way. In fact, it can be a positive thing if you’re someone who has been affected and has missed a payment (or worse) as a result.